Final voice on GE is bearish on conglomerate break-up plans – and retail traders on Reddit agree
- General Electric divides its remaining business into three publicly traded companies.
- An authoritative voice from the company said that the rise in GE shares was no surprise, but that ultimately the “dust was settling.”
- Retail traders were also broadly bearish, saying the company is not a good investment.
A definitive General Electric analyst is skeptical of plans to split the company into three companies – and some retail traders on Reddit think the same.
Since the century-old company announced its split into aviation, energy and healthcare companies, GE’s stock has risen about 3% in aggregate in two days of trading. JPMorgan analyst Stephen Tusa, known for commenting on GE, said the positive reaction came as no surprise.
âGE shares have responded positively to almost all of the strategic announcements, in part because of a tightly controlled narrative,â Tusa wrote in a November 9 memo. “As the dust settles and details emerge, the value of assets to the shareholder of GE has almost every time deteriorated significantly.”
Factoring in $ 32 billion in net debt and an additional $ 2 billion in severance costs, he predicted that the shares would total less than $ 70 each. As individual companies, he said aviation would be worth $ 43 a share, health care $ 23, and electricity $ 8.
âUltimately, the portfolio’s earlier attempts to ‘create value’ have fallen victim to weak underlying details compared to the historically positive narrative under GE’s umbrella,â Tusa wrote. “Most of the spins hover between announcement and consumption, but a flat stock is the best case for us.”
On Reddit’s investment threads, like Wall Street Bets, retail traders were also more bearish than positive about the breakout. After the announcement, discussions of the company on Reddit increased and comments about selling GE shares topped buy mentions 8 to 5, according to data from HypeEquity.
Many retail traders noted the company’s level of debt and what they called “mismanagement.”
âAt the end of the day, no, GE is not a good investment,â wrote a Redditor. âUnless something drastic or crazy changes, they’re dinosaurs, and they live on fumes. Another said the company had “summary financial statements” and another said if it was split into three it would “go to the bathroom more easily.”
The company was once an icon of American manufacturing. After peaking in 2000 and tumbling during the 2008 recession, the former giant company has since offloaded many of its businesses, including NBC and GE Appliances, among others.